Eskom’s Plan To Survive The Lockdown
Eskom is investigating various measures which will help it to survive the national lockdown, reports the Sunday Times.
According to the report, the national lockdown has cost Eskom nearly R2.5 billion revenue over the past month.
Eskom spokesperson Sikonathi Mantshantsha said Eskom would not be approaching the government for a bailout.
Instead, Eskom has taken measures such as initiating a voluntary severance package process for managers across February and March.
“The cost of this was capped at R400m, which is to be paid from Eskom’s internal cash resources,” said Mantshantsha.
“This will be recouped in savings on expenditure on personnel within a year of the programme closing. There will be no forced job losses.”
He added that Eskom is looking into other ways to cut costs, including increasing its collection of unpaid debts and reducing in procurement expenditure.
“Eskom’s largest single expenditure item, primary energy [coal], is one of the areas that is being looked at to yield the biggest cost benefit,” explained Mantshantsha.
“The lower oil prices also certainly present opportunities for efficiencies.”
Eskom is owed a total of R28 billion by municipalities – nearly R20 billion of which is owed by Soweto residents.
“To collect these unpaid debts Eskom has taken legal action against the municipalities and, where appropriate, curtailed supply to some of the customers,” Mantshantsha said.
“In areas where there are high nonpayment rates for services rendered, Eskom has resolved to limit expenditure on fixing broken infrastructure.”
Experts respond
Energy expert Ted Blom said that the suspension of coal contracts could save Eskom R5 billion per month, which he said is about enough to offset its current losses in revenue.
However, he warned that the legality behind such a move could be problematic.
For this reason, he said Eskom would be better served focusing on proper cuts to its staff.
Analyst Clyde Mallinson told the Sunday Times that costs could be cut by reducing the amount of diesel burnt for emergency power.
“The lockdown has created a slowdown in the demand for coal, with the decrease in energy demand possibly seeing Eskom save close to R1bn a month in regards to the burning of less diesel,” said Mallinson.
However, he believes that cutting staff is not an option.
Instead, he suggested that Eskom “aggressively pursue the build of a solar and wind replacement fleet for its coal-powered stations.”
Managing debt the biggest issue – Eskom CEO
Speaking with Chris Yelland, Eskom CEO Andre de Ruyter said that Eskom’s most difficult challenge is managing its debt.
“We need to look at our revenue, and in the current depressed economic environment, sales are likely to remain flat, if anything,” said de Ruyter.
“There is also a potential downside risk if forecasts of a 6% contraction in the South African economy are anything to go by,” de Ruyter added.
Despite Eskom’s woes, de Ruyter said that there are also opportunities such as “green financing.”
“Many of the development finance institutions (DFIs) that are lenders to Eskom, are keen to support a decarbonisation of Eskom and the South African economy,” he said.
“We have old coal-fired power stations, with 8,000 to 10,000 MW that should be retired over the next ten years. These have a footprint of some 34 million tonnes of CO2 per annum, which is about 15% of our overall CO2 emissions.”
“While any free marketeer would frown on this, Eskom is a monopoly, and this means we are able to guarantee access for green energy to the electricity grid,” he said.
He said that the weak economy could therefore ultimately benefit Eskom in the long-term.
“If we play our cards right, we can convert these challenges into advantages that will attract additional financing linked to a decarbonisation profile,” said de Ruyter.
www.ferroalloynet.com
